Unlike many European nations, private employers in all states of the U.S. (outside of Montana) are considered “at will.” Employers in an at-will state can terminate an employee for any reason, with or without cause, at any time during their employment. Likewise, an employee can leave the job anytime, with or without reason or notice. Employment contracts or union collective bargaining agreements are the only ways to modify an employer’s at-will status.
Even though employment in the U.S. is predominantly “at will,” this does not mean an employer can (or should) fire an employee for no reason. For example, employers cannot fire employees for illegal reasons, such as discrimination or whistleblowing. Also, firing an employee without notice or cause gives the employee an opportunity to construe an unlawful reason for their discharge, potentially resulting in hours of labor mounting a defense for an unemployment or EEOC claim later. Moreover, releases without rhyme or reason can negatively affect remaining employees’ morale, leading to reduced productivity, increased requests for time off, or fear of decreased job security.
While it may be easier to deliver an employee the “pink slip,” following the best practices for firing an employee below can ensure a smooth exit while mitigating the chances of falling into legal hot water or reduced productivity from remaining employees.
Also read: Making Hard Personnel Decisions
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What are the steps for at-will termination?
By familiarizing themselves with the steps below, employers can reduce the dread associated with employee terminations and streamline the process for managers across the organization.
1. Put a legal termination policy in place
Companies should have a termination checklist, or other termination procedures, in place before moving forward with an employee discharge. Additionally, such systems should outline who is responsible for handling the employee termination, such as a direct manager, a member of HR, or both.
Although at-will employers do not need policies that outline termination procedures like employee handbooks, they are not excused from adhering to applicable federal, state, and local laws. Termination policies are great ways to demonstrate that companies are trying to follow these laws. Moreover, they serve as a guidebook for current and incoming employees about company expectations and appropriate conduct in the workplace.
A good termination procedure is a combination of several different policies, including:
- Employee codes of conduct
- Work rules
- Lists of fireable offenses
- Progressive discipline steps
- Incident investigation procedures
- Exit interviews
- Benefit termination steps
While these policies are essential employee handbook inclusions, employers should also examine if any precedents were set during previous terminations and add them as needed. For example, suppose a restaurant had granted prior employees at least one week following their last day of employment to turn in their company uniform. In that case, HR teams should include this rule somewhere in their termination procedures. Doing so creates consistency for future employee terminations and minimizes the risk of treating employees differently.
HR, executives, and managers should align on the termination procedures before distributing and implementing them in the workplace. Smaller organizations without a dedicated HR team should take advantage of their Employment Practices Liability Insurance (EPLI) hotline (if they have one) or an employment law attorney to review that their termination procedure is legally sound.
2. Communicate with the employee beforehand
Employers should be in constant communication with employees about their performance. Unless an employee commits a serious or inexcusable offense that warrants immediate dismissal, such as sexual harassment, violence, or other illegal activity, employees should not be surprised their jobs are in jeopardy. However, remaining silent and hoping the employee will magically improve is not the answer — until the employee is put “on notice,” they may be unaware their performance is suffering and take no measures to change.
Communication with employees can take many different forms depending on the employer’s policies, including:
- Informal conversations
- Performance reviews
- Performance improvement plans (PIPs)
- Disciplinary warnings
- Last chance agreements
What’s important is sitting down with poor performers and providing ample performance-based metrics and other documentation exhibiting where improvement is needed. Moreover, managers should document these conversations and have employees sign off on the documentation. In some cases, this documentation could be the evidence to prove employers did not fire an employee for an illegal reason in wrongful termination suits.
Some employers like Ford have taken unconventional measures, such as offering severance agreements to underperformers in place of rigorous performance enhancement plans that may lead to traditional discharges. This gives underperforming employees a chance to leave their employer with a monetary incentive instead of risking future financial loss if their performance does not improve. Whatever an employer decides, communication with employees about their performance and documenting those conversations should come before the termination conversation as often as possible.
3. Prepare before the termination meeting
Employers should start preparing for the discharge conversation if there is no improvement in an employee’s performance or behavior after a set number of conversations, performance reviews, and written warnings. Organizations should start gathering the following offboarding documentation for the meeting:
- Documentation of past conversations
- Disciplinary warnings
- Termination form
- Termination of benefits information (COBRA)
- Last paycheck (if applicable)
While at-will employers are not required to have written warnings or other documentation before firing an employee, it can help organize the termination conversation and serve as evidence in the event of a lawsuit.
Direct managers should recruit a reliable witness, such as someone from HR or another higher-up, and prepare a script outlining the important aspects of the termination conversation ahead of time. A witness serves as a way to substantiate the events of the termination conversation in case of a lawsuit. Meanwhile, writing a script allows employers to make sure the termination decision aligns with company policies and that management followed progressive discipline steps appropriately.
Planning the date and time when the conversation will occur is just as critical. For example, some employers have termination meetings on Fridays, so employees have the weekend to recover; others choose Mondays or Tuesdays, so employees have the week to find new positions. The best solution balances the employee’s particular circumstance with the schedule of the manager hosting the termination meeting.
In contrast, employers should hold the termination conversation as an impromptu meeting at the end of the day. A neutral, discreet area increases the chances of privacy for the employee to be emotional. It also mitigates the chances that an employee can take any adverse action against the company, such as stealing clients or causing property damage.
4. Make sure risk management protocols are in place
Employers should plan to secure company property and information following an employee’s termination. Allow the employee to turn in company property, such as IDs, keys, uniforms, or computers, within a timeframe outlined by company policies. Administrators or IT should immediately remove the employee’s access to e-mails, applications, or other company programs. If the employee works remotely, employers should consider providing pre-paid shipping labels and extra time for them to return their company items.
If the employee does not return company property, there is little an employer can do to retrieve them. It is illegal for companies to withhold final paychecks from employees until they return the company property. However, deducting the cost of company property from the employee’s final pay is permissible in some states if the employee is non-exempt from overtime.
In most cases, employers need a company property deduction authorization agreement from the employee before withholding any money from their last check. The deduction should not bring the employee’s last paycheck below minimum wage. Because of conflicting laws in each state, employers may want to include in their severance agreements a clause stating that an employee’s severance pay will be deducted for any unreturned company equipment.
Finally, employers should have someone escort the employee to their workstation to retrieve any personal items. An escort can ensure an employee only takes personal items, not company property or proprietary information. They also act as a monitor to make sure that the employee does not make a scene.
In some circumstances, having the employee retrieve their items may be dangerous after the termination conversation. If safety is a concern, employers should notify the employee that they will ship their items to their home and a timeframe within which to expect them. In addition, employers should make a good-faith effort to return the items to the employee to avoid legal issues later. Finally, if safety is indeed a concern when returning an employee’s items, employers may consider reaching out to their local police department for assistance.
5. Be brief and don’t make it personal
The termination conversation is often stressful for the employee, manager, and witness. However, employers can reduce stress and minimize risk by following these best practices in the termination meeting:
- Prepare a termination script.
- Provide evidence that supports the case for termination, such as policy violations, poor performance history, or attendance records.
- Allow the employee to ask questions and be brief in responses.
- Have the manager, witness, and employee sign a termination form acknowledging the reason for termination.
During the conversation, employers may feel bad for the employee, especially if they become distressed and plead for their job. Employers should not take this personally. While empathy is important, remain professional, courteous, and unwavering in the decision to terminate. Employers should check their feelings at the door and look to their evidence to remember why they are holding the termination conversation in the first place.
In the same vein, employers should avoid insulting or demeaning the employee. Instead, aim to be polite and professional in the termination conversation. In doing so, managers will set a standard to treat all employees respectfully, even during difficult times.
6. Provide information on any necessary benefits
During the employee’s termination conversation, managers should set aside some time to discuss how their company benefits (if any) are affected and the options they have available following termination. The main benefits include:
Depending on the state, employers may be required to provide the employee’s last paycheck immediately, within 24 hours to a few days, or by the next regularly scheduled payday. Failing to follow the appropriate laws could result in severe fines. In California, for example, penalties accrue for every day an employee’s last paycheck is withheld.
Most employers who offer medical insurance benefits qualify for COBRA and must provide the necessary COBRA paperwork within 30 days of the termination to the employee. Considering COBRA includes information on extending employee benefits, employers should consider preparing this paperwork to present to the employee during the termination conversation.
If the employer offers a severance agreement to the employee, carefully outline the details. For example, employees should know how much, when, and for how long their severance pay will last. Employees must also understand what kinds of future claims they are releasing from the employer’s responsibility.
Employees are entitled to apply for unemployment insurance benefits following termination, regardless of whether or not they are eligible. In most cases, states require employers to provide information on how to apply for unemployment benefits during the employee’s exit, along with the employer’s FEIN, unemployment account number, and business name and address.
Outside of severance agreements, employers must provide information on these benefits to employees upon termination. Refraining from doing so places the employer at risk for fines or future lawsuits.
7. Effectively communicate the employee’s exit with the rest of the staff
Employers cannot prevent news of an employee’s separation from spreading to the rest of the staff. However, employers can be tactful in how they present the information.
Similar to the termination conversation, brevity is key. Don’t elaborate to the staff on the reason for the employee’s termination since there may be legal consequences (for example, being sued for slander). Instead, focus on recruitment plans to replace the employee or how managers will distribute the work. Additionally, if the discharged employee managed others, make sure to provide any affected employees with information on who to report to and changes in processes in the interim.
Employers should consider the reason for the employee’s termination before sharing the news with the staff. For instance, firing someone for sexual harassment requires a different approach than firing someone for poor performance. In these cases, before sharing, it’s wise to consult outside counsel to avoid any legal missteps, such as privacy violations or adverse effects on remaining employees’ morale.
Similarly, managers should share news of the employee’s exit in a method befitting their previous role. For example, if the employee was relatively low-level on the company organizational chart, private conversations with their immediate coworkers may be prudent. On the other hand, an email to the company may suffice for executive dismissals.
According to Zeeshan Arif, CEO and founder of the software development company Whizpool, “Terminations can lead to feelings of abandonment or betrayal if the terminated employee has been with the company for a long time.” Moreover, they could cause remaining employees to feel their jobs are also in jeopardy.
Therefore, employers should remain impartial and professional when sharing the news of an employee’s termination and focus on the company’s future. Doing so will allay any fears among remaining staff that their jobs are in jeopardy and increase feelings of trust in a company’s transparency.
Why are terminations important to the health of the company?
Firing an employee is always hard, but it is a natural part of the employee lifecycle. Avoiding a discharge because it is uncomfortable or burdensome could put the company and employees at risk in the long run.
Instead, a strategically planned and conducted termination promotes an efficient workplace and builds respect for the company during an age of quiet quitting. In the end, terminations are a necessary part of maintaining a healthy and successful business as they ensure company productivity and efficiency while protecting the overall well-being of the workforce.
Putting a termination procedure together and sticking with it can be difficult, but software solutions can help. Check out our comprehensive HRIS Software and Performance Management Software guides to find a solution that includes helpful features like termination policy templates and employee performance tracking.
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